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National Bank of Kazakhstan: Insurance companies will increase capital up to 2020

Zhanat Kurmanov, the Deputy Chairman of the National Bank, spoke about the state of the insurance sector in an interview with
National Bank of Kazakhstan: Insurance companies will increase capital up to 2020

The insurance market is one of the fastest growing segments of the country's financial sector. Over the past 12 years, the assets and capital of insurance companies have shown steady growth. Moreover, over the past three years, 4 insurance companies have been reorganized and voluntarily surrendered their licenses. Zhanat Kurmanov, the Deputy Chairman of the National Bank, spoke about the state of this sector

- How do you assess the insurance market’s current state and potential?

- Over the past 5 years, assets have grown by 2 times and have reached over one trillion tenge by the end of 2018. This indicates the insurance market activation, its financial stability growth and, as a result, an increase public trust in the market. 

Today, the insurance market is represented by 28 insurance organizations (6 of them are licensed in the life insurance industry) and 14 are insurance brokers. The entire infrastructure for the successful operation of the insurance market is created.  

Despite the dynamic growth of the insurance market, its importance in the country economy development remains low today, but has the potential for further development.

In 2018, the National Bank carried out a significant work to improve the insurance legislation. In July 2018, the Law of the Republic of Kazakhstan “On Amendments and Additions to Certain Legislative Acts on Insurance and Insurance Activities, Securities Market” was adopted, under which a number of initiatives aimed at further developing the insurance market were implemented.

The main directions of the amendments are the following questions: the introduction of online insurance as of 2019, as a result of which the public is able to enter into insurance contracts in electronic form through the Internet resources of insurance companies without visiting the office or agent involvement. Online insurance will provide geographic accessibility and reduce the cost of insurance services for the public and businesses. Insurance and payment procedures will be significantly simplified, which will speed up all business processes greatly; ensuring the safety, sustainability, enhancement of the status and expansion of the functions of the Unified Insurance Database, and the formation of a reliable database on insurance statistics. By 2022, the database will contain all the information on compulsory and voluntary classes of insurance.

The measures taken by the National Bank promote the growth of trust in the insurance market, the development of high-quality and affordable insurance services, and are aimed at providing a competitive, stable and dynamically developing insurance market that meets the needs of the economy, population and business.

- Could you tell us about the unit-linked system? What is the ICs’ potential? What is the potential of LICs? What is the market potential?

- Unit-linked insurance product is one of the investment tools, which combines both life insurance and investment. Each insurance premium paid by the policyholder within this product consists of two parts. One part is directly connected with the insured risks (life and survival). The second is a saving component invested in the instruments of the stock and other financial markets. The policyholder gets to choose which financial instruments his contributions will be invested in.

As for the potential of this product, one of the ways to implement the instructions of the President of the Republic of Kazakhstan on taking measures to activate the domestic stock market, announced in January 2017, is to introduce new products in the life insurance industry, allowing policyholders to combine investment management with life insurance (unit -linked) and participate in the insurer's profit.

It should be noted that in international practice, life insurance companies are entitled to combine insurance and investment activities.

- Do all insurance companies provide online services?

- In accordance with the adopted law, online insurance has been introduced as of January 1, 2019, implying the obligation of insurance companies to provide individuals and legal entities with an insurance service in 7 compulsory insurance classes on their Internet resources.

19 insurance organizations hold the licenses for compulsory insurance classes in the non-life insurance sector. At the stage of legislative provision of online insurance, the National Bank created the necessary legal framework for providing online services for voluntary insurance classes as well by insurance companies.

- Are the ICs and LICs ready for competition within the WTO framework?

- With the entry into the World Trade Organization at the end of 2015, Kazakhstan assumed obligations to admit new foreign financial institutions to the financial market, including insurance (reinsurance) organizations.

Joining WTO gives us access to foreign markets, and large foreign companies come to the national market. In 2020, the insurance sector will become open to access to the market for branches of foreign companies.

The main competitive advantages of foreign insurance organizations are the quality of service, optimized business processes, progressive IT systems, as well as reduced insurance costs.

The National Bank has also set the requirements to foreign insurance organizations for the implementation of activities in the Kazakhstan insurance market. For example, it is required that the total assets of an insurance (reinsurance) organization non-resident of the Republic of Kazakhstan be not less than the equivalent of five billion US dollars, as well as having at least a decade of experience in the implementation of insurance (reinsurance). There are also other requirements for foreign insurance (reinsurance) companies aimed at ensuring the integrity and stability of the financial market.

The National Bank, as the financial market regulator, has taken a number of measures to increase the requirements for the financial stability of insurance organizations. In particular, a phased increase in the minimum capital of insurance organizations until 2020 is expected, the minimum threshold for the charter capital size for newly created insurance organizations has been significantly increased. These and other measures are aimed at creating a competitive insurance market ...



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